The commander of the multinational force patrolling the Gulf said Thursday that Iraq is smuggling record amounts of oil by paying off Iran and using its coastal waters to avoid detection.

Vice-Adm. Charles Moore, commander of the U.S. Navy's 5th Fleet, told the U.N. Sanctions Committee that the Iraqi regime was on track to earn between $500 million and $1 billion this year if Iran doesn't clamp down on the illicit trade, according to Western diplomats who briefed reporters on Moore's presentation.

Moore estimated that Baghdad could smuggle 4.8 million metric tons of oil in 2000 - more than the last four years combined, the diplomats said, speaking on condition of anonymity.

The profits are separate from the more than $5 billion Iraq is expected to earn this year through legitimate, U.N.-monitored oil sales, which can only be used to buy humanitarian goods and spare parts for its oil industry.

Iraq has been barred from selling its oil on the open market since U.N. sanctions were imposed after its 1990 invasion of Kuwait, which led to the Gulf War.

Baghdad has been allowed to sell limited amounts of oil since 1996 through the U.N. oil-for-food program, but has also continued to smuggle refined oil out of its Basra and Abu Flus ports.

A Multinational Interception Force has been patrolling the Gulf since 1990 to make sure tankers don't violate the sanctions, but its ships and aircraft can only patrol international waters in the center of the Gulf.

While countries bordering the Gulf have largely cooperated, local Iranian authorities have recently resumed allowing tankers carrying Iraqi oil to use their coastal waters to avoid interception, the diplomats said, quoting Moore.

The increase began in September and record levels of smuggling were reported in December, January and February, a diplomat said, speaking on condition of anonymity.

Rising oil prices have made the trade worthwhile, since smugglers can offset the steep prices charged by agents at Iranian checkpoints - $50 per metric ton - to hide in Iranian waters and issue phony documents saying the oil is Iranian, the diplomats said.

"The information is pointing very strongly in the direction of Iran and to the ships that come out of the Iraqi-Iranian waters," said Dutch Ambassador Peter van Walsum, who chairs the sanctions committee.

Van Walsum said the committee had yet to decide how to approach the Iranian authorities to crack down on the scheme.

The increase in smuggling was highlighted last month when the multinational force intercepted a Russian tanker that was carrying 4,000 tons of oil. Russia had claimed the oil was Iranian but tests conducted by U.S. labs showed it was Iraqi.